Chancellor of the Exchequer George Osborne said the U.K. government will sell its remaining shares in Royal Mail Plc to help reduce the national debt.
The 30 percent stake -- currently valued at about 1.5 billion pounds ($2.3 billion) -- will be sold later this year, the Treasury said in an e-mailed statement Thursday. The government appointed Rothschild to advise on the sale.
“That business is thriving now we’ve given it access to private-sector funding,” Osborne told lawmakers in Parliament. “Holding a billion pounds of Royal Mail shares in public hands is not a sensible use of public money.” Royal Mail was down 5 percent at 500 pence at 4:35 p.m. in London.
Osborne is under pressure to deliver on pre-election pledges to balance the books with further cuts to welfare and bring down a debt burden that has more than doubled since the financial crisis to 80 percent of economic output. The debut sale of Royal Mail in October 2013, which raised about 2 billion pounds for the Treasury, was criticized for undervaluing the company after the shares surged following the initial public offering.
“Savings need to be made through proper reform, not short-term salami slicing,” Chris Leslie, finance spokesman for the opposition Labour Party, said in a statement. “The Tories’ botched privatization of Royal Mail in the last parliament shortchanged taxpayers by hundreds of millions of pounds. The government now needs to explain how it has learned the lessons of last time so that the same mistakes aren’t simply repeated.”
The Treasury said the sale will be designed to deliver the best value for money, with further details announced in due course.
Royal Mail said last month that market conditions in the year that began in April will be tough, with letter volumes -- the mainstay of its business -- continuing to decline at a 4 to 6 percent annual pace as people switch to e-mails and margins are squeezed by Amazon.com Inc. accelerating the expansion of a rival delivery network in the expanding parcels sector.
Lawmakers heard last year the initial share offering was managed by two banks that provided the lowest valuations in a tender process.
A report by former Labour Party Treasury Minister Paul Myners in December found that the government could have raised 20 to 30 pence more a share for Royal Mail, equivalent to as much as 180 million pounds. A political imperative to achieve a successful sale meant that the government placed more importance on getting the price at the bottom of the range right than a private seller might have, the inquiry concluded.
Osborne also said the in-year budget review for government departments has been completed, with departments finding a further 3 billions pounds of savings in the 2015-16 fiscal year. The expected revenue from the Royal Mail sale will boost this to 4.5 billion, he said.
With the budget deficit still equal to almost 5 percent of gross domestic product, the government will use the July 8 budget and the subsequent spending review to take the “necessary steps” to eliminate that shortfall by 2018, Osborne said.
“The global economy is full of risks at the present,” he said. “As with any challenge the sooner we get on with it the better.”
Other asset sales include the Department for Transport bringing forward the disposal of land around King’s Cross rail station in London, valued at 345 million pounds, the Treasury said.